Comment: The Fall of Man

“Free Trade is not based on utility but on justice.” Edmund Burke´s famous quote seems to be more important today than ever before. It is very difficult for me to understand the rationale behind an unlawful referendum in Catalonia and the political disaster related thereto, showing a clear lack of leadership and a lack of legal and economic understanding.

The historic principality, part of the former Kingdom of Aragon, enjoys traditionally the highest degree of autonomy from the central government in Madrid. They use their own language, their own school programme and even have their own police forces, which acted as it could have been expected against the constitution of Spain, passively tolerating the unlawful events.

Half of the income tax and value-added tax (VAT) levied in Catalonia is returned to the region of 7.5 million people, with the central government in Madrid deciding how the rest is spent. Catalonia receives 58 percent of the proceeds of a number of other taxes, including on alcohol and petrol, raised there. Its tax-collecting agency also gathers some taxes on wealth, inheritance, gambling and transport, and keeps all the proceeds.

I am not only saddened by the new division between Spain, by the mutual lack of solidarity (rich regions do have to share with poorer regions of a nation), the mutual lack of understanding, and the new dimension of hatred on both sides. I am shocked to see how companies and capital simply moved out in just a few weeks.

52 percent of the Catalonian GDP abandoned Catalonia, starting with banks and energy providers whose compliant status within the EU is a condition precedent for their business. EU passporting is of the essence, but many other firms followed, 1,700 in total to date.

I am not sure that the inhabitants of Catalonia were made aware of these dreadful consequences by their political leadership. The fairy tale of immediate EU membership, legally impossible since joining the EU requires a five-year probate membership followed by a unanimous vote of all EU members for acceptance, has been repeated less and less. What is left is a divided country where billions of euros of business have virtually disappeared, investors have pulled out, waited, then gone somewhere else.

Recently I heard from a friend in Barcelona about how unfair it was for Madrid to insist that the referendum was unlawful. I think that this is the essential point to note: when corporations saw the first serious violation of the rule of law, this was considered to be the end of the same levels of justice as understood and appreciated in Europe and many other countries.

Whatever the reasons for the disputes might be, international investors do not care. Their sole concern is to be in a business-friendly environment and to enjoy justice, having the certainty that the latter will prevail. Now, the Catalonian leadership has disappeared too and, if their referendum was lawful, it is not clear why they have left their home country.

Unfortunately, it will take some three to five years under normal and stable circumstances before businesses return. I hope this aspect is not forgotten: prosperity always goes hand in hand with the rule of law. Justice is a prerequisite for free trade.

Professional service firms and their networks and alliances have seen over the last decades the rise and fall of different economies, with respective member firms struggling. The European Debt Crisis was just one of them. The trouble is that international investors do not care about local or historical resentments. They do not care about wonderful, professional, dedicated accounting firms in Russia, Turkey, Venezuela or any other part of the world, even a wealthy part of Spain like Catalonia: they only care about the safety of their investments. Any Fall of Man will scare investors off, anywhere in the world – it’s not personal, it´s just business.

Top Content

MSI joins AGN and DFK in Global Connect

A year after AGN International and DFK International launched Global Connect, multi-disciplinary association MSI has joined the group.

Views from the Eurozone

With Brexit looming, populist governments gaining footholds in a number of countries and movements such as the Yellow Jacket protests in France, 2018 was anything but a quite year for the eurozone. Here leaders report to the IAB on their markets.

Eastern promise and how to find it

With China rising as a global power, Jonathan Minter spoke with ShineWing’s Zhang Ke and Marco Carlei at the World Congress of Accountants 2018 in Sydney, to discuss the cultural challenges that occur when Chinese networks look beyond their border, and the dividends available for those who overcome them.

The UK: uncertain waves rule Britannia

The UK’s accountancy profession is currently in a period of much uncertainty. The Competition and Markets Authority (CMA) has released its review into the listed audit market which could cause the biggest shake-up the profession has seen in years, the Kingman Review has described the Financial Reporting Council (FRC) as not being fit for purpose and called for it to be replaced. All the while the country remains in a deadlock on Brexit negotiations.

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please
view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies
in accordance with our privacy policy unless you have disabled them.